The U.S. economy grew by 0.78 percent in the final quarter of the year to closeout 2010 with a yearly increase of 2.9 percent. This represents the largest annual growth since 2005 and offers further evidence that the recovery is gaining momentum. A breakdown of the results shows that a resurgence in consumer spending helped power the gains with an increase in exports providing additional support.
For the quarter, consumer spending rose 4.4 percent after a 2.4 percent increase the previous quarter. Holiday sales were up 5.5 percent over 2009 handing retailers their best holiday season in five years.
Exports jumped 3.4 percent for the quarter with China and other emerging countries providing most of the market. This trend could continue into 2011 as nearly $50 billion in export deals were announced during ChinaÃ¢â‚¬â„¢s state visit to Washington earlier this month. The deals involve several American icons including Honeywell, Caterpillar, and Westinghouse.
Reminders of the recession do remain however. The Labor Department noted that wages and benefits rose 2 percent for the year, and while this is a faster pace than 2009, it is still the second slowest rate of wage growth since records have been kept starting in 1983. As of December, unemployment still remains elevated at 9.4 percent with little hope for significant advancement in the short term. In fact, Federal Reserve Chairman Ben Bernanke has said the Fed does not expect meaningful improvement until late in the year.
The latest unemployment claims report supports the ChairmanÃ¢â‚¬â„¢s statement. For the week ending January 22nd, the number of new applications for jobless benefits exceeded projections by 51,000 to a total of 454,000 new claims for the week. Until companies are convinced that the economy is well and truly on its way to recovery, expect employment to continue to lag.